Chinese took over Congo’s giant diamond deposits

After having obtained a privileged access to Katanga’s copper and cobalt reserves, China has won control of the main diamond deposits of the country.

Five years after a consortium led by the state companies China Railways and Sinohydro signed a 6 billion dollars mines for infrastructures contract, which gives them access to 10 million tons of copper and 600,000 t of copper in Katanga, another public-owned Chinese firm has taken control of the main diamond deposits of the country. The Anhui Foreign Economic Construction Corporation (AFECC) which is based in Hefei (Eastern China) has won indeed access to a resource of 158 million carats, representing a value of US $ 3.4 billion. This amount represents the equivalent of 15 years of production of the only industrial company of the sector in Congo, the Minière de Bakwanga (MIBA), which is 80 percent owned by the state and which close to bankruptcy, owing to a number of reasons. One of them is that during the two conflicts of 1996-1997 and 1998-2003, the company was forced to contributed to the war effort, namely to purchase weapons from the Czech Republic and from Ukraine. But many more factors contributed to Miba’s collapse. A mortal blow was given in 2000 when MIBA received the order from the then Minister of Mines, Frédéric Kibassa Maliba to hand over its main reserves including the Tshibwe kimberlite to a a company called Sengamines. This company was a joint venture formed by Comiex, a company close to the late President Laurent Kabila and by a company called Osleg, which in fact is the abbreviation of “Operation Sovereign Legitimacy”, a financial outfit created by several high-ranking Zimbabwean army officers including Gen. Vitalis Zvinavashe, which was later substituted in Sengamines’ capital by a company called Oryx, owned by an Omani businessman called Thamer Al Shanfari. But more is to come. Indeed, as showed a Congolese parliament Committee of inquiry on the validity of contracts signed during both wars, which was completed in 2005, MIBA signed in April 2003 a contract with a company called Emaxon Finance International, owned by the influential Israeli businessman, Dan Gertler, which in the end proved extremely detrimental to the Congolese mining firm interests.According to the contract, MIBA obtained a US $ 15 million loan from Emaxon which it had to reimburse in four years with a zero interest rate. The aim was to purchase equipments to increase the production which owing to lack of maintenance and investments was sliding down dangerously for many years. In return, MIBA was supposed to sell Emaxon 88% of its diamond output with a 5% discount. Even, if 2004, the discount was reduced to 3%, the Committee found out that the loan was three times more expansive than a normal bank loan. The collapse of MIBA, whose 5,000 workers think it was stripped off by its main shareholder, the Congolese state, has also political reasons. Indeed, in 2007, the government turned down the offer of MIBA’s minority shareholder, the Congolese businessman, François Kalaa Mpinga, who is also the CEO of Mwana Africa Plc. Kalaa Mpinga, the son of the late Foreign Minister, Mpinga Kasenda, who died in 1994, had come up with a rescue plan. He had managed to secure funding form South Africa’s Industrial Development Corporation (IDC) up to $ 120 million and on top of that, he was prepared to invest $ 75 million in the company. But he was asking half of the shares in return and a contract management. But the government refused. According to the then Minister of State Assets, Jeannine Mabunda, the offer was not sufficient to give Mwana Africa access to a resource which was estimated at several billion dollars. But mining consultants and Congolese MPs thing the real reason, since there wasn’t at that time any other candidate to relaunch the activities, was Kalaa Mpinga’s alleged proximity with some opposition circles. He was namely suspected to have supported the former rebels of the Congolese Rally for Democracy. The fear was as well that he could emerge as an economic force which is independent from the President or finance Joseph Kabila’s rival, the veteran politician Etienne Tshisekedi, who belongs like himself to the Luba tribe. This is within this context that the deal was struck with AFECC. The Congolese ambassador in Harare, Mawapanga Mwana Nanga plaid a key role, in selling the project to the owners of AFECC’s subsidiary, Anjin Investments which exploits the gems of the Marange area, in a joint venture with the Matt Bronze corporations, which is considered as a front company for the Zimbabwean Defence Force (ZDF). The contract was signed on the 18 March in Kinshasa by the Congolese Ministers of Mines and State Assets, Martin Kabwelulu and Louise Munga on the one hand, and on the other by AFECC’s Vice-President, Bai Xiangqian. According to the contract, AFECC is expected to pay a 61 million dollars entry fee and gets 50 percent of the shares of a new joint venture called Société Anhui-Congo d’Investissement Minier (SACIM), with the Congolese state, the Industry Promotion Fund (FPI) and the Social Security Institute. (INSS) as partners. SACIM inherits all Sengamines concessions, offering access for the Chinese to the Tshibwe kimberlite whose reserves are estimated at 61 million carats and to various smaller but still large deposits including Ndaye (7.3m. cts) and Tshikasa (4.3m. cts) The contract also stipulates that AFECC will finance the construction of infrastructures in the mining concession up to $ 100 million including the construction of a new processing plant roads and an hydroelectric power plant in addition to antipollution measures and to the purchase of mining equipments. On top of that, AFECC has committed itself to assist the Congolese state to obtain Chinese public funding for the construction of a second hydropower plant at a place called Tubi-Tubidi and of a tar road between the plant and the capital of the Eastern Kasai province, Mbuji-Mayi. AFECC will also develop agro-industrial projects in the province. According to SACIM’s business plan, the company should start operating in late 2013, with a production of 600,000 cts per annum and increase output to 6 million cts in 2016. The special deal provides tax advantages for the joint venture, such as an income tax of only 30 percent and a commercial tax of 6 percent of revenues. For Kasaï, where diamond production on an industrial scale has stopped since end 2008, the deal is not necessarily a bad one provided it can offer jobs to the MIBA workers who are waiting for several years the payment of their salary arrears. But there is no such guarantee in the contract.